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Credit card debt top fear points: In 10 slides, here is all you want to know

Tue April 26 2016, 12:06 pm
  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    The rise in credit card debt in itself is not so much of a worry as much as two accompanying factors. First, industrial credit – or loans made to businesses or corporations – is not keeping pace and history shows that it usually comes ahead of personal credit growth. Moreover, debit card spends, which often keep pace – suggesting increasing consumer spending propensity – are actually declining. The combination of these factors signal growing indebtedness amongst Indian consumers and borrowers, State Bank of India’s Chief Economic Advisor Dr. Saumya Kanti Ghosh told me on my weekly Policy Watch show on Rajya Sabha TV this week. Ghosh said they studied the relation between credit allocated to industry and personal loans over the last 10 years. “This clearly showed that industry credit growth leads to personal credit growth and not the other way round,” he said. Here are nine reasons why this trend might be of concern, according to Ghosh and his team of economists. (By Govindraj Ethiraj) (Reuters)

  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    1. Credit card debt: The overall divergence between deposit and credit growth has increased recently. While All Scheduled Commercial Banks (ASCB) deposit growth has hit a 53-year low of 9.9 percent in the last year, credit offtake (or money loaned) improved marginally (at 11.3 percent as on March 18, 2016). (Reuters)

  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    2. Credit card debt: Most of the incremental lending growth has been to the personal loan segment, especially housing and also MUDRA (loans to micro & small enterprises). But, within personal loans, it is the credit card loan segment that is rising rapidly. (Reuters)

  • (Reuters)

  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    4. Credit card debt: Further, the real outstanding has increased despite negative inflation over the last 17 months. This shows that with WPI inflation consistently undershooting projections, the real value of nominal debt/credit card outstanding has become higher than expected. (Reuters)

  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    5. Credit card debt: Incidentally, on an annualised basis, the outstanding number adds up to over Rs 100,000 per annum, higher than the nominal per capita income of around Rs.70,000. This can be worrisome once again, particularly in pockets. (Reuters)

  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    6. Credit card debt: The result does not change much even if we take consumer price inflation into account. Which means we could be seeing a build-up of financial risks that will make it difficult for households to manage their balance sheets. (Reuters)

  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    7. Credit card debt: Debit card spending is declining. One way of acknowledging a more structural shift in consumer behaviour is to see if all modes of spending are rising. Evidently, that’s not the case. It’s only credit card spends that are rising. (Reuters)

  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    8. Credit card debt: E-commerce transactions could be contributing to this phenomenon as could lower inflation. But eventually, the worry is that if you and I are buying beyond what we can afford to repay, then there is a problem. (Reuters)

  • Credit card debt, Credit card loan, Credit card purchase, Credit card payment, Credit card expense, Credit card debt recovery, Credit card debt payment

    9. Credit card debt: Back to industrial credit, if you look at the numbers closely, much of it is not fresh loans but refinancing of existing ones–or, simply put, redistribution of the same pie. So parts of industrial credit are going into refinancing existing loans while consumers borrow afresh on credit cards. (Reuters)

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